W HY D ISCIPLINE A GRICULTURE ? Agriculture is one of the few - - PowerPoint PPT Presentation

TRAINING PROGRAMME FOR THE GOVERNMENT OF INDONESIA

The Agreement on Agriculture

Jogjakarta, Indonesia 26-29 March 2019

AGENDA

I.

Why discipline agriculture in the WTO?

II.

The scope of the Agreement: what products are covered?

• III. The Three Pillars: export subsidy disciplines, rules on

market access and domestic support disciplines.

• IV. Export subsidies (Articles 3.3, 8, 9 and Nairobi Decision)

V.

Market Access (Article 4.2)

• VI. Domestic Support Commitments (Articles 6, 7 and

Annex 3)

• VII. Measures exempted from the reduction commitments

(Article 6.2 and Annex 2)

WHY DISCIPLINE AGRICULTURE?

• Agriculture is one of the few economic sectors which has its own

agreement within the WTO. Other than the broad WTO distinction between goods and services, all other WTO provisions are neutral as to the economic sector involved. Agreement on Agriculture was one of the key achievements of the Uruguay Round.

• Before

the Agreement

• n

Agriculture trade in agriculture was characterised by distortions and impediments to agricultural trade, including import bans, quotas, variable import levies, minimum import prices and non-tariff measures maintained by state trading enterprises.

• Excessive market price support meant expanding domestic production

which not only replaced imports completely but resulted in structural

• surpluses. Export subsidies were then used to dump surpluses onto the

world market, depressing world market prices.

WHY DISCIPLINE AGRICULTURE?

• By agreeing to cap and reduce these subsidy levels and import

barriers, developed countries hoped to bring an end to "subsidy wars" that were draining their national budgets and driving down world commodity prices.

• Farmers in developing countries were forced to compete with the

treasuries of the world’s richest countries in export markets and in their home markets.

• To create a "fair and market-oriented agricultural trading system",

ddisciplines were introduced to address the structural distortions in agricultural trade.

WHY DISCIPLINE AGRICULTURE?

• Agreement on Agriculture seeks to reduce restrictions on

trade in agricultural products by introducing disciplines to:

• reduce subsidized exports;
• increase market access;
• reduce domestic support measures.

➢ These are referred to as the three pillars of the Agreement on Agriculture

THE SCOPE OF THE AGREEMENT:

WHAT PRODUCTS ARE COVERED?

• Article 2 of the AoA ("product coverage") provides that "this

Agreement applies to the products listed in Annex 1 to this agreement".

• Annex 1 ("Product Coverage") captures a full range of agricultural

products (products in HS chapters 1 to 24):

• basic agricultural products such as wheat, milk and live animals
• products derived from them such as bread, butter and meat
• processed

agricultural products such as chocolate and sausages.

• wines, spirits and tobacco products
• fibres such as cotton, wool and silk,
• raw animal skins destined for leather production.
• Excludes "fish and fish products" and forestry products.

EXPORT SUBSIDIES

• The general rule in the WTO is no export subsidies. Article 3 of the SCM

Agreement prohibits all forms of export subsidies "[e]xcept as provided in the Agreement on Agriculture...".

• The AoA "carves out" agricultural subsidies from the general prohibition

in Article 3 of SCM Agreement.

• Unlike the SCM Agreement, the AoA does not require Members to

eliminate all their export subsidies (BUT NOTE Nairobi Decision).

• Export subsidies listed in Article 9.1 may be permitted subject to

reduction commitments expressed in the form of budgetary and quantity commitments in a WTO Member's Schedule (Article 9).

• Export Subsidies not listed in Article 9.1 are prohibited if they

result in or threaten to circumvent export subsidy commitments (Article 10).

• All other agricultural export subsidies are prohibited (Article 8).

EXPORT SUBSIDIES

Article 3.3 of the AoA contains obligations relating to both: ▪ Scheduled Agricultural Products ("A Member shall not provide export subsidies listed in paragraph 1 of Article 9 in respect of agricultural products … specified in Section II of Part IV of its schedule in excess of the budgetary outlay and quantity commitments specified therein"). ▪ Unscheduled Agricultural Products ("A Member… shall not provide such subsidies [i.e. listed in Article 9.1] in respect of any agricultural product not specified in that Section of its Schedule"). Thus ▪ WTO Members can provide agricultural export subsidies listed in Article 9.1 but only with respect to agricultural products that have been scheduled and to the extent of the reduction limits are set out in their schedules. ▪ Exception for developing countries unscheduled products: Article 9.4.

WHICH WTO MEMBERS MAY PROVIDE EXPORT SUBSIDIES?

The following 25 Members are entitled to provide agricultural export subsidies (only with respect to specified products and subject to reduction commitments):

During the Uruguay Round the following reduction commitments were agreed:

• Developed-countries: average of 36% by value and 21% by quantity over a six-year

implementation period.

• Developing countries: average of 24% by value and 14% by volume over a 10-year

period.

• LDCs have no reduction commitments. (Article 15)

Australia (5) EU (20) Norway (11) Turkey (44) Brazil (16) Hungary (16) Panama (1) United States (13) Bulgaria (44) Iceland (2) Poland (17) Uruguay (3) Canada (11) Indonesia (1) Romania (13) Venezuela (72) Colombia (18) Israel (6) Slovak Rep. (17) Cyprus (9) Mexico (5)

• S. Africa (62)

Czech Rep. (16) New Zealand (1) Switzerland-Liechtenstein (5)

EXPORT SUBSIDIES

The Doha Ministerial Declaration calls for "reduction of, with a view to phasing out, all forms of export subsidies". As an outcome of the negotiations, Members agree to establish detailed modalities ensuring the parallel elimination of all forms of export subsidies and disciplines on all export measures with equivalent effect by a credible end

• date. See WT/L/579, para. 17.

TYPES OF EXPORT SUBSIDIES

Article 9.1 lists six types of export subsidies: (a) the provision by governments or their agencies of direct subsidies ... contingent

• n export performance;

(b) the sale or disposal for export by governments or their agencies of non- commercial stocks of agricultural products at a price lower than the comparable price charged for the like product to buyers in the domestic market; (c) payments on the export of an agricultural product that are financed by virtue of governmental action, whether or not a charge on the public account is involved…; (d) the provision of subsidies to reduce the costs of marketing exports of agricultural products (other than widely available export promotion and advisory services) including handling, upgrading and other processing costs, and the costs of international transport and freight; (e) internal transport and freight charges on export shipments, provided or mandated by governments, on terms more favourable than for domestic shipments; and (f) subsidies on agricultural products contingent on their incorporation in exported products.

ARTICLE 9.4 OF THE AOA

▪ Article 9.4 of the AoA provides:

• "During the implementation period, developing country Members shall not be

required to undertake commitments in respect of the export subsidies listed in subparagraphs (d) and (e) of paragraph 1 above, provided that these are not applied in a manner that would circumvent reduction commitments." ➢ i.e. developing countries would be able to introduce these types of subsidies provided that they had not scheduled the products in Part IV, Section II. ▪ Paragraph 8 of Nairobi Decision on Export Competition extended the duration

• f Article 9.4 until the end of 2023. It provides:

Developing country Members shall continue to benefit from the provisions of Article 9.4 of the Agreement on Agriculture until the end of 2023, i.e. five years after the end-date for elimination of all forms of export subsidies. Least developed countries and net food-importing developing countries listed in G/AG/5/Rev.10 shall continue to benefit from the provisions of Article 9.4 of the Agreement on Agriculture until the end of 2030.

ARTICLE 10 OF THE AOA

▪ Article 3 of the AoA is limited to disciplining the export subsidies listed in Articles 9.1 of the AoA. What about the types of subsidies not listed in Article 9.1? ▪ Article 10.1 of the AoA: "Export subsidies not listed in paragraph 1 of Article 9 shall not be applied in a manner which results in, or which threatens to lead to, circumvention of export subsidy commitments; …". ➢ Article 10 refers inter alia to export credits and food aid.

ARTICLE 10 OF THE AOA

▪ In US – FSC the Appellate Body found that the FSC measures at issue, although not export subsidies listed in Article 9.1, were agricultural export subsidies inconsistent with Article 10.1. "Members would certainly have 'found a way around', a 'way to evade', this prohibition if they could transfer, through tax exemptions, the very same economic resources that they are prohibited from providing in other forms under Articles 3.3 and 9.1." (para. 150)

EXPORT SUBSIDIES AFTER NAIROBI

▪ In December 2015, Members made the following commitments in the Nairobi Decision on Export Competition:

• That developed countries would eliminate their subsidies

immediately.

• That developing countries would eliminate their export

subsidies over a staggered period (2018-2022).

• New disciplines under which Members agree not to provide

export credits unless they comply with the requirements of the Nairobi Decision. ▪ Some Member's Schedules have already been amended. E.g. Australia and the EU.

MARKET ACCESS

• The core market access obligation is contained in Article 4.2 of the

Agreement on Agriculture. Article 4.2 prohibits certain types of border measures. Article 4.2 provides: Members shall not maintain, resort to, or revert to any measures of the kind which have been required to be converted into ordinary customs duties1, except as otherwise provided for in Article 5 and Annex 5. _________________________________________________________

1 These measures include quantitative import restrictions, variable import levies,

minimum import prices, discretionary import licensing, non-tariff measures maintained through state-trading enterprises, voluntary export restraints, and similar border measures other than ordinary customs duties, whether or not the measures are maintained under country-specific derogations from the provisions

• f GATT 1947, but not measures maintained under balance-of-payments

provisions

• r

under

• ther

general, non-agriculture-specific provisions

• f

GATT 1994 or of the other Multilateral Trade Agreements in Annex 1A to the WTO Agreement.

DOMESTIC SUPPORT

▪ In WTO non-legal terminology, domestic subsidies for agricultural products are identified by special "boxes":

▪ "Green" meaning permitted because they have no, or minimal, distortive effect on trade; Annex 2 to the Agreement on Agriculture. ▪ "Amber" meaning possibly legal or illegal depending their trade- distortive nature; calculated on the basis of AMS. ▪ "Blue" meaning possibly trade-distorting nature but permitted as the measures are linked to production limitation programmes. ▪ "Development" box meaning permitted because they encourage agricultural rural development, which is an integral part of the development programmes of developing countries.

DOMESTIC SUPPORT

Source: “WTO Disciplines on Agricultural Support”, David Orden, et al., Cambridge Press, 2014.

WHAT TYPES OF MEASURES ARE

INCLUDED IN THE AMBER BOX?

• All domestic support measures which do not correspond to the

"Green" and "Blue" boxes, or to other exemptions (e.g. development box), are considered to distort production and trade, and therefore fall into the "Amber Box" category.

• Therefore, to determine whether a measure falls within the

amber box, one must confirm that it is a domestic support measure (i.e. not an export subsidy) and that it does not fall within the “Green” or “Blue” boxes, or another exemption (e.g. development box).

WHAT ARE THE OBLIGATIONS WITH

RESPECT TO THE AMBER BOX?

• "Amber Box" support measures are not prohibited but are

subject to reduction commitments.

• This is based on calculation of the current total aggregate

measurement of support ("AMS").

• AMS - A monetary expression of the size of annual transfers

provided for a specific agricultural product in favour of the producers of that product, or non-product-specific support provided in favour of agricultural producers in general (Annex 3 lays down how the AMS is to be calculated.)

• AMS shall include budgetary outlays and revenue foregone.

(“budgetary outlay” refers to money spent by governments to support a product).

AMS

▪ AMS cannot exceed the commitment levels bound in a Member's schedule. ▪ Part IV of Members' Schedules of Commitments lists its Annual Bound Commitment Levels for each of the years of the implementation period (which ended in 2000), and the Final Bound Commitment Level for all subsequent years. ▪ Thus, a WTO Member is in compliance with its domestic support reduction commitments in any year if its Current Total AMS does not exceed the corresponding Commitment Level. ▪ Calculation of AMS: domestic support measures plus market price support (for the latter, see Annex 3 of the Agreement on Agriculture).

AMS

Under Article 6.3 of the Agreement of Agriculture, WTO Members must ensure that their annual domestic support measures do not exceed their commitment levels specific in part IV of their schedule of concessions.

AMS

Article 7.2(b) states that "[w]here no Total AMS commitment exists in Part IV of a Member's Schedule, the Member shall not provide support to agricultural producers in excess of the relevant de minimis level set out in paragraph 4 of Article 6". According to Article 6.4(b), the de minimis level for developing countries, such as Indonesia, is 10 per cent of the total value of production for a basic agricultural product in question.

MEASURES EXEMPTED FROM AMS

• Pursuant to Article 6 of the Agriculture Agreement, the

following measures are not subject to reduction commitments (i.e. exceptions to amber box): ➢ Green box measures: domestic support that is not trade- distorting (Annex II). ➢ Blue box measures: certain direct payments under production limiting programmes (Article 6.5). ➢ De minimis levels support: support not exceeding 5% or 10%

• f the value of the product or production for developed and

developing countries respectively (Article 6.4). ➢ Development programme measures: certain support to encourage agricultural and rural development in developing countries (S&D) (measures listed in Article 6.2).

Source: http://www.fao.org/3/a-i3819e.pdf

MEASURES EXEMPTED FROM AMS

GREEN BOX

Agr griculture Agr greement Paragraph 1, , Annex II II

• 1. Domestic support measures for which exemption from the reduction

commitments is claimed shall meet the fundamental requirement that they have no, or at most minimal, trade-distorting effects or effects on production. Accordingly, all measures for which exemption is claimed shall conform to the following basic criteria: (a) the support in question shall be provided through a publicly-funded government programme (including government revenue foregone) not involving transfers from consumers; and, (a) the support in question shall not have the effect of providing price support to producers; plus policy-specific criteria and conditions as set out below.

GREEN BOX

Agr gric iculture Agr greement: Par aragraph 1, 1, Ann nnex II II

• 1. Domestic support measures for which exemption from the reduction

commitments is claimed shall meet the fundamental requirement that they have no, or at most minimal, trade-distorting effects or effects on production. Accordingly, all measures for which exemption is claimed shall conform to the following basic criteria: (a) the support in question shall be provided through a publicly- funded government programme (including government revenue foregone) not involving transfers from consumers; and, (a) the support in question shall not have the effect of providing price support to producers; plus policy-specific criteria and conditions as set out below.

Fundamental requirement of green box

• Publicly funded
• gov. programme
• No price support

to producers See additional criteria for specific measures Example: public stockholding (para. 3, Annex II)

GREEN BOX

▪ Depending on the nature of the particular policy under consideration, the support measure must further fulfil policy-specific criteria set out in detail in the Annex. ▪ Specific programmes mentioned in Annex II that may qualify as “green box”: 1) General services:

• Research programmes
• Pest and disease control
• Training services
• Agricultural extension services
• Marketing and promotion services
• Infrastructural services including electricity reticulation, roads and

rail, port facilities, dams and drainage schemes, etc.

GREEN BOX

2) Public stock-holding for food security purposes 3) Domestic food aid 4) Decoupled income support 5) Government financial participation in income insurance and income safety-net schemes 6) Payments for relief from natural disasters 7) Structural adjustment through producer or resource retirement programmes or through investment aids 8) Payments under environmental programmes 9) Payments under regional assistance programmes

ADDITIONAL GREEN BOX PROGRAMMES: 2013 MINISTERIAL CONFERENCE IN BALI

• Land rehabilitation
• Soil conservation and resource management
• Drought management and flood control
• Rural employment programmes
• Issuance of property titles
• Farmer settlement programmes
• In order to promote rural development and

poverty alleviation

WT/MIN(13)/37 WT/L/912

PUBLIC STOCKHOLDING PROGRAMMES

PUBLIC STOCKHOLDING PROGRAMMES

• 3. Public stockholding for food security purposes5

Expenditures (or revenue foregone) in relation to the accumulation and holding of stocks

• f products which form an integral part of a food security programme identified in national
• legislation. This may include government aid to private storage of products as part of such

a programme. The volume and accumulation of such stocks shall correspond to predetermined targets related solely to food security. The process of stock accumulation and disposal shall be financially transparent. Food purchases by the government shall be made at current market prices and sales from food security stocks shall be made at no less than the current domestic market price for the product and quality in question. __________________________________________________________________

5 For the purposes of paragraph 3 of this Annex, governmental stockholding programmes

for food security purposes in developing countries whose operation is transparent and conducted in accordance with officially published objective criteria or guidelines shall be considered to be in conformity with the provisions of this paragraph, including programmes under which stocks of foodstuffs for food security purposes are acquired and released at administered prices, provided that the difference between the acquisition price and the external reference price is accounted for in the AMS.

5&6 For the purposes of paragraphs 3 and 4 of this Annex, the provision of foodstuffs at

subsidized prices with the objective of meeting food requirements of urban and rural poor in developing countries on a regular basis at reasonable prices shall be considered to be in conformity with the provisions of this paragraph.

PUBLIC STOCKHOLDING PROGRAMMES

PUBLIC STOCKHOLDING PROGRAMMES

• 3. Public stockholding for food security purposes5

Expenditures (or revenue foregone) in relation to the accumulation and holding of stocks of products which form an integral part of a food security programme identified in national legislation. This may include government aid to private storage of products as part of such a programme. The volume and accumulation

• f

such stocks shall correspond to predetermined targets related solely to food security. The process of stock accumulation and disposal shall be financially transparent. Food purchases by the government shall be made at current market prices and sales from food security stocks shall be made at no less than the current domestic market price for the product and quality in question. ________________________________________________________

5For the purposes of paragraph 3 of this Annex, governmental stockholding

programmes for food security purposes in developing countries whose

• peration is transparent and conducted in accordance with officially published
• bjective criteria or guidelines shall be considered to be in conformity with the

provisions of this paragraph, including programmes under which stocks of foodstuffs for food security purposes are acquired and released at administered prices, provided that the difference between the acquisition price and the external reference price is accounted for in the AMS.

5&6 For the purposes of paragraphs 3 and 4 of this Annex, the provision of

foodstuffs at subsidized prices with the

• bjective
• f

meeting food requirements of urban and rural poor in developing countries on a regular basis at reasonable prices shall be considered to be in conformity with the provisions of this paragraph. Prices for purchases and sales S&D treatment Condition:

• Difference must be

included in AMS

• Reference price of

1986-1988

STOCKHOLDING PROBLEMS

Problems with the requirements for public stockholding under Annex II

• Reference price corresponds to the period 1986-1988. Food prices

have increased since then. Therefore, a gap can easily exist between the acquisition price and the external reference price.

• This gap must be included in the AMS.
• WTO Members with AMS commitments: OK
• WTO Members with no AMS commitments: must stay within de

minimis.

STOCKHOLDING SOLUTIONS

• An amendment to the Agreement was proposed, but proved to be
• controversial. Compromise was to agree on due restraint.
• Bali 2013 – “Peace clause”

“In the interim, until a permanent solution is found, and provided that the conditions set out below are met, Members shall refrain from challenging through the WTO Dispute Settlement Mechanism, compliance of a developing Member with its

• bligations under Articles 6.3 and 7.2 (b) of the Agreement on Agriculture (AoA) in

relation to support provided for traditional staple food crops25 in pursuance of public stockholding programmes for food security purposes existing as of the date of this Decision, that are consistent with the criteria of paragraph 3, footnote 5, and footnote 5&6 of Annex 2 to the AoA when the developing Member complies with the terms of this Decision.26 “

These requirements include the notification that the developing Member is exceeding or is at risk of exceeding its AMS or de minimis levels, as well the provision of certain information according to the specific template contained in the Bali Ministerial Decision.

STOCKHOLDING SOLUTIONS

• November 2014
• Interim solution extended; “Members shall not challenge”
• Interim solution remains valid until a permanent solution is

found; target is 2017

• Nairobi 2015
• Note, reaffirm, continue efforts to find a permanent

solution.

BLUE BOX

▪ "Blue Box": Article 6.5

• f

the Agreement

• n

Agriculture covers any support measure that would normally be in the "Amber Box", but which is placed in the "Blue Box" if the support also requires farmers to limit their production. ▪ Article 6.5 of the Agreement on Agriculture exempts from reduction commitments certain direct payments to farmers which are tied to production- limiting programmes.

BLUE BOX

▪ The following criteria must be fulfilled:

• payments

are directly paid

• ut

from the government budget to the producers;

• payments are conditional upon some form of

production-limiting requirement imposed on the recipient of the support, which include:

• payments based on fixed area and yields, or
• payments made on 85 per cent or less of the

base level of production;

• livestock payments on a fixed number of head.

▪ Historically, only a few Members have used the blue box (most prominently the EU).

DEVELOPMENT BOX

Article 6.2 covers the provision of, for example, fertilizers or seeds to low-income or resource poor producers in developing country Members.